’Poor auditing’ led to freeze on regional development funds

The European Commission has imposed a temporary freeze on payments to 51 EU regional development and cohesion projects over the past year, because of poor auditing controls by member states.

Commission documents seen by European Voice show that 49 payments were stopped last year, and two this year, totalling €2.16 billion. This amounts to 8.25% of the €26bn that the Commission paid out to member states under the European Regional Development Fund (ERDF) and the Cohesion Fund in 2010. For most of the programmes, funds were unfrozen again after a few months, but funding for some remains interrupted.

The country that suffered the most ‘interruptions’ was Spain, with €1.48bn frozen in February 2010 for 21 programmes, on the grounds of insufficient national auditing checks on the payment claims made by the recipients. Funding resumed in May last year after Spanish authorities implemented recommendations to bolster audit checks and monitoring, the Commission said.

For similar reasons, payments were also temporarily withheld from Bulgaria, Germany, Hungary, Italy, Portugal and the UK. Aid to ten ERDF projects in England, totalling €184 million, was interrupted in October, and resumed in December. A further €41m in aid to two programmes in Scotland remains frozen after being interrupted last December. Payments to seven aid programmes in Germany, totalling €175m, were cut off in February, and restored in June.

Irregularities

Currently, funding to eight programmes remains interrupted, including the two Scottish projects, one further German project, worth €43m, and five programmes in Bulgaria worth €14.6m.

A 2006 EU regulation allows the Commission to interrupt payments to member states for a maximum of six months if it has evidence of “serious deficiencies” in the management and control systems or finds “serious irregularities” that have not been corrected.

Members of the European Parliament’s budgetary control committee have criticised the Commission for not using the ‘interruption’ tool more often. Jorgo Chatzimarkakis, a German Liberal MEP who is drafting the committee’s report on the EU’s spending in 2009, has called for a “clear naming and shaming” policy.

Johannes Hahn, the European commissioner for regional policy, has told the committee that the Commission has “a strict practice” of interrupting or suspending payments if weaknesses are found.

The Commission’s aim is to put pressure on member states to ensure that funds are properly spent, thus avoiding formal – and lengthy – procedures to suspend programmes or demand repayment.